Condemned to informality: Cuba's experiments with self-employment during the Special Period
Description
The recent growth of self-employment (trabajo por cuenta propia ) in Cuba has expanded opportunities for employment, income, professional development, and the provision of goods and services, while simultaneously increasing individual economic autonomy and exacerbating socioeconomic inequalities. Through a review of the existing legislation that regulates self-employment, supplemented by a series of 64 in-depth interviews with self-employed workers in the food service, transportation, and housing sectors of Havana's economy, this study seeks to understand the present role and future prospects for Cuba's self-employed workers by asking the following questions: First, do self-employed workers (cuentapropistas) believe that they are beginning to lay the necessary groundwork for the eventual establishment of a small, private business sector. Second, how do self-employed workers currently respond to the existing legal and fiscal framework for micro-enterprise in Cuba? Third, how does work as a licensed self-employed worker differ socioeconomically from unlicensed, clandestine economic activity in the same three sectors? The hypothesis is that (1) current restrictions make impossible job creation or income generation significant enough to facilitate the emergence of small- and medium-sized enterprises, and that (2) government regulations discourage the growth of micro-enterprises, without declaring them illegal. However, (3) self-employed workers will continue to respond to current prohibitive government restrictions either by 'hedging' on their licenses (underreporting their incomes and engaging in economic activities not included in their license) or by 'informalizing' their private operations (operating underground without a license), not by ceasing to practice them The dissertation argues that the current legal framework discourages the growth of licensed micro-enterprises, drives many entrepreneurs out of business or underground, provokes tax evasion, and encourages operators to develop deeper links with the informal sector. A small number of large-scale operations tend to thrive, while the majority of micro-enterprises are condemned to informality (clandestine operation). Permitting the hiring of employees, extending enterprise rights to currently prohibited areas and markets, allowing for the deduction of one's actual expenses, and ending the monthly quota tax would have the positive effect of increasing competition, productivity, tax revenue, and legal employment, while simultaneously reducing prices, exaggerated incomes, tax evasion, and clandestine economic activity